Forums Homework Help Assume the common stock is sold at $10 per share

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    Aakanksha
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    The G.R.Q. Exploration Company is being organized to undertake oil and gas exploration. It is agreed that the company will commence operations with assets of 500,000. However there is some disagreement as to how these assets are to be financed. The first director believes theat 70% of these assets should be financed by common stock and the other 30%by 9% preferred stock. Another director suggested a highly leveraged financial structure with 20% common stock and the other 80% to consist of 10%, 15 year bonds. The third director suggest a compromise in which 50% of the financing would come from common stock, 30% from 8% preferred stock and 20% from 10% interest 15 year bonds. Assume the common stock is sold at $10 per share Assume an income tax rate of 40%. Using EGIT of 100,000 and 200,000.

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